100% good news: 7th Cir. reverses “100% grated parmesan cheese” dismissal

Bell v. Publix Super
Markets, Inc., 2020 WL 7137786, — F.3d –, Nos. 19-2581, 19-2741 (7th Cir.
Dec. 7, 2020)

Note: Then-Circuit
Judge Barrett was a member of the panel when this case was submitted but did
not participate in the decision and judgment. The appeal was resolved by a
quorum of the panel pursuant to 28 U.S.C. § 46(d).

In a victory for
common sense, the court of appeals reversed the dismissal of this consumer protection
claim (except for certain parts of the case; because of the way the district
court handled this multidistrict litigation, it found that the appeal for some
was untimely). Defendants advertise “100% Grated Parmesan Cheese.” Plaintiffs alleged
that the products actually and deceptively contain between four and nine
percent added cellulose powder and potassium sorbate, though the ingredients
list discloses these as ingredients (they fight caking and mold, respectively).

The district court
found that “100%” was ambiguous (maybe it was just 100% grated, not 100%
parmesan/cheese) and any deception was dispelled by the ingredient list, and
also that “common sense would tell a reasonable consumer that, despite the 100%
claims, these cheese products must contain added ingredients because they are
sold unrefrigerated in the main grocery aisles, alongside dried pastas and
canned sauces.”

The core holding,
consistent with cases from other circuits: “[A]n accurate fine-print list of
ingredients does not foreclose as a matter of law a claim that an ambiguous
front label deceives reasonable consumers. Many reasonable consumers do not
instinctively parse every front label or read every back label before placing
groceries in their carts.” This rule recognizes that ordinary shoppers aren’t
judges parsing statutes, and that ambiguities can be carefully designed to
deceive. It was at least plausible that, in “100% Grated Parmesan Cheese,” the
100% applied to the cheese. [Cheese is sold grated or not grated. Why would anyone ever expect to get a half grated block of cheese or think the 100% referred to the degree of gratedness?]

Context does matter.
And “unreasonable or fanciful interpretations of labels or other advertising”
can merit dismissal on the pleadings. Moreover, defendants can offer evidence
for their [dumb, linguistically implausible] interpretation showing that
consumers aren’t misled. (The court pointed out that plaintiffs said they were
prepared to submit surveys showing 85-95% misleadingness, and affidavits from
linguists that the most natural and plausible reading was “100% parmesan cheese
that is grated.”) Misleadingness is generally a factual matter, as is appropriate
in consumer protection cases (and in trademark and Lanham Act false advertising
cases), and there was no reason to disregard plaintiffs’ allegations:

What matters here is how consumers actually behave—how they perceive
advertising and how they make decisions. These are matters of fact, subject to
proof that can be tested at trial, even if as judges we might be tempted to
debate and speculate further about them. We doubt it would surprise retailers
and marketers if evidence showed that many grocery shoppers make quick
decisions that do not involve careful consideration of all information
available to them. See, e.g., U.S. Food & Drug Admin., Guidance for
Industry: Letter Regarding Point of Purchase Food Labeling (Oct. 2009) (“FDA’s
research has found that with [Front of Package] labeling, people are less
likely to check the Nutrition Facts label on the information panel of foods
(usually, the back or side of the package).”); Karen Bradshaw Schulz,
Information Flooding, 48 Ind. L. Rev. 755, 782 (2015) (when terms “like
‘low-fat’ and ‘multi-grain’ were written in big, bright letters on foods,”
consumers would “focus on the bright claim rather than turning the box around
to read the dull, black-and-white nutrition label on the back”) ….

Next, defendants
argued that the FDA’s definition of “grated cheese” allows them to call their
products “grated cheese” because that designation allows addition of cellulose
and potassium sorbate. As the court pointed out, “[t]he problem lies in the ‘100%,’
especially since the pleadings provide reason to think that consumers understand
‘100% grated cheese’ to mean that the cheese does not have the additives.”
Interestingly, the court also pointed to competitive reasons: a manufacturer of
grated cheese without additives needs a way to differentiate its
product, which couldn’t be done if these sellers also get to claim “100%
cheese.”

Regardless, “average
consumers are not likely to be aware of the nuances of the FDA’s regulations
defining ‘grated cheese.’ … Rather, both plain meaning and the plaintiffs’
surveys and linguists plausibly indicate that a significant portion of
consumers read the labels as promising pure cheese without added ingredients.”

Relying on “common
sense” about lack of refrigeration did not justify dismissing the claim. As the
plaintiffs pointed out, “pure grated Parmesan cheese can be shelf-stable for a
long time without refrigeration.” And “today’s grocery shoppers can often spot
unrefrigerated cartons of pure grated Parmesan sold beside the cheese wheels
that source them.” True, defendants’ products are shelved in the main grocery
aisles instead. “But since pure grated Parmesan can be and sometimes is sold
unrefrigerated, common sense is not a substitute here for evidence, and
certainly not as a matter of law.”

The court also
rejected defendants’ alternative preemption argument.

The FDCA expressly bars
states from “directly or indirectly establish[ing] under any authority … any
requirement for a food which is the subject of a standard of identity … that
is not identical to such standard of identity or that is not identical to the
requirement of section 343(g)” of the Act. The FDA’s standard of identity for
“grated cheeses” allows the defendants to add anticaking agents (cellulose
powder) and antimycotics (potassium sorbate) and to call the product “grated
cheese.” In fact, the standard of identity requires defendants to call their
products “Grated Parmesan Cheese.” “If only one variety of cheese is used, the
name of the food is ‘grated ____ cheese’, the name of the cheese filling the
blank.”

That provision is
silent about the addition of “100%.” Given the FDCA, a remedy requiring further
disclosures would be preempted. But plaintiffs “seek only to stop defendants
from voluntarily adding deceptive language to the federally permitted labels.”
Preventing deception wouldn’t establish a new requirement different from the
standard of identity, especially given that the FDCA already provides generally
that “a food shall be deemed to be misbranded” if its labeling is “false or
misleading in any particular.”  “[S]tate-law
claims challenging defendants’ voluntary addition of ‘100%’ to their labels are
not preempted…. After all, there are all sorts of potentially misleading
additions that standards of identity do not explicitly ban.” For example, a
false claim that the cheese was from Italy wouldn’t violate the standard of
identity, but that wouldn’t require preemption. “The FDCA’s preemption
provision means that, while states may not require sellers to add further
labeling that is not required by federal law, they may prevent sellers from
voluntarily adding deceptive content that is not required by federal law.”

Nor was there
conflict preemption/a safe harbor. Though defendants argued that the FDA
actually approved Kraft’s use of the “100% Grated Parmesan Cheese” label in
1999 and 2000, that wasn’t what happened. In 1999, the FDA issued Kraft a
temporary permit “to market test a product designated as ‘100% Grated Parmesan
Cheese’ that deviates from the U.S. standards of identity for Parmesan cheese
and grated cheeses” in that it used “a different enzyme technology that fully
cures the cheese in 6 months rather than 10 months.” In 2000, the FDA extended
the permit. The technology was the focus of the permit, and there was no
indication that the FDA assessed the potential deceptiveness of “100% Grated
Parmesan Cheese” or approved that label.

Judge Kanne
concurred to emphasize that, “while lawyers and judges can find ambiguity in
just about anything, that’s not what we expect of the reasonable consumer.” On
a motion to dismiss, it’s not enough for defendants to “proffer some
alternative, nondeceptive reading of the front label—or fashion the label
precisely so that it can bear one plausibly non-deceptive reading—regardless of
whether the reasonable consumer (or some significant portion of reasonable
consumers) would read it that way,” even when the ingredient list resolves the
ambiguity. The district court’s alternative rule would allow a court to
announce “as a matter of law that a statement is not deceptive even where it
could deceive reasonable consumers as a matter of fact. It assumes reasonable
consumers not only notice ambiguities but then investigate to resolve them,
either by scouring the fine print or, even less likely, reading up on the shelf
life of Parmesan cheese. It assumes too much.”

“[I]f a plaintiff’s
interpretation of a challenged statement is not facially illogical,
implausible, or fanciful, then a court may not conclude that it is nondeceptive
as a matter of law.”  In concluding that the
challenged statement was ambiguous, the district court necessarily found that
reasonable consumers may interpret the statement in multiple, plausible ways. That
meant that likelihood of deception was a factual question that couldn’t be
resolved on the pleadings. The deception didn’t have to be “clear”: “Determining
that a statement is not ‘clearly misleading’ on the pleadings robs the jury of
the opportunity to determine, as a matter of fact, whether the statement is ‘clearly
misleading,’ just ‘misleading,’ or ‘not misleading at all.’” Also, a consumer’s
interpretation isn’t implausible as a matter of law “just because fine print
elsewhere on the label could clarify an ambiguity that a reasonable consumer
might not have even noticed in the first place.”

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